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DISMISSAL NEWS:
In Re Exxon Mobil Corp. Securities Litigation
Steven P. Bann
New Jersey Law Journal. October 10, 2005
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EXCERPT: Limitations of Actions -- Securities Fraud – Civil Action No. 04-1257; United States District Court (DNJ); opinion by Wolfson, U.S.D.J.; filed September 14, 2005. DDS No. 50-7-1623. Plaintiffs' allegations regarding defendant's failure to recognize impairments based on the collapse in oil prices relate to conduct that occurred prior to the merger and should have been known before then, and the claims under § § 10(b) and 14(a) are barred under the one-year discovery limitations period; the lengthened limitations period under Sarbanes-Oxley does not apply; plaintiffs also have failed to satisfy PSLRA's requirement to specify why the statements in the SEC filings were misleading. I. A. In this consolidated action, Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio were appointed lead plaintiffs. Defendants move to dismiss the complaint, pursuant to Fed. R. Civ. P. 12(b)(6) and 9(b).
B. This is a class action brought under the federal securities laws on behalf of all persons and entities who were either holders of Mobil Corp. common stock on May 27, 1999, when Exxon and Mobil shareholders voted to approve a proposed merger between the two companies, or who acquired Exxon stock on or about Nov. 30, 1999, through a stock-for-stock exchange in connection with the merger. Pursuant to the merger, each share of Mobil stock would be exchanged for 1.32015 shares of Exxon stock (the exchange ratio). On April 5, 1999, the two companies issued a joint proxy statement seeking shareholder approval of the proposed merger at Exxon and Mobil's respective shareholder meetings to be held on May 27, 1999. This proxy statement incorporated by reference Exxon's annual report on Form 10-K, filed on March 26, 1999, with the Securities and Exchange Commission, which contained Exxon's 1998 year-end financial statements. Exxon also filed three quarterly reports on Form 10-Q with the SEC that incorporated statements regarding the proposed merger that were made in the proxy statement. … F. Because plaintiffs cannot sufficiently demonstrate scienter through motive and opportunity, they must demonstrate scienter through allegations of specific facts that constitute 'strong circumstantial evidence of conscious misbehavior or recklessness.' Advanta, 180 F.3d at 534-35. It is not enough for plaintiffs to allege that defendants knew or should have known about the alleged fraud. However, this is precisely the kind of bare allegation that plaintiffs make in their complaint. Even if plaintiffs' allegations regarding defendants' improper failure to record the SFAS 121 impairments are taken as true, these claims would not demonstrate an 'extreme departure' from the standards of ordinary care. At most, the complaint demonstrates that Exxon might have engaged in accounting methods not generally used by its competitors. None of the facts in plaintiffs' complaint indicates that defendants' position on whether to record the SFAS 121 impairments was an egregious departure from the range of reasonable business decisions as opposed to simple corporate oversight or mismanagement. |
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